Taxes on Tobacco and Alcohol

Alcohol and tobacco are one of the most harmful products among those which are frequently consumed by the majority of people all over the world. Out of all the merchandise that is sold in supermarkets and convenience stores, alcohol and tobacco are the things that ruin health and cause millions of deaths each year. That is why governments of many countries debate on the level of control of these products. Raised taxes are one of such control methods. However, besides benefits there are several negative effects that might be caused by such step.

One of the main disadvantages of increased ‘sin’ taxes is the discrimination of low-income taxpayers. According to Andrew Haile, the majority of smokers come from households making less than 000 a year. High-income citizens do not feel the increase in taxes on alcohol and tobacco, whereas they are more significant for low- and middle-income ones. In order to solve this problem, the taxes on alcohol and tobacco should be deducted from the wage. The amount should be calculated based on the salary as well as on the yearly medical checkup which will show whether a person smokes or not. This system will increase the taxes only for those people who smoke. In addition, rich people will pay a fixed percent from their salary instead of fixed amount of money.

Another disadvantage that may appear due to the increase in taxes on alcohol and tobacco is the development of black markets. When the profits are large enough, this may lead to illegal alcohol and tobacco trade, which will be highly demanded. For example, in some regions of Canada, cigarette smuggling is rather lucrative since the taxes on cigarettes are high. This problem can only be solved by increasing the penalties for illegal tobacco and alcohol trade as well as by improving the work of departments which control these issues. The Prohibition of 1920–1933 in the United States showed clearly what may happen if too extreme and thoughtless measures are taken.

Finally, there is a moral side of the current debate, which argues whether or not the governments should make decisions regarding the consumption of harmful products instead of citizens. Libertarians find that it is up to the individual to decide whether to spend the money on sports or alcohol as long as the harm is caused only to the same individual. However, this concept is not relevant when talking about the car accidents caused by drunk drivers or non-smokers stricken with cancer from second-hand smoke.

The main advantage of sin taxes increase is lower consumption. Statistics shows that increased taxes result in the higher price, which decreases consumption. 

Despite all advantages, there are several negative effects which may be caused by raising tax on alcohol and tobacco. First of all, they include development of black markets, discrimination of low-income taxpayers, lack of choice for individuals and others. However, lower consumption as a result of higher taxes is a significant positive achievement, which allows ignoring all the disadvantages. Moreover, each negative effect can be easily eliminated by providing correct policies. For example, discrimination of low-income taxpayers can be excluded by changing the tax collection system, appearance of black markets can be prevented by improving the work of specific control departments.

If the article was cognitive for you, proceed to read other exclusive paper on our web. Most of the articles are written by Naomi Yang, a professional writer.